Athenex plans to sell more stock to fund its operations

A little more than seven months after Athenex Inc. closed on its initial public offering, the Buffalo-based drug development company is planning to sell even more shares to investors.

The company plans to sell nearly 5 million shares of its stock to investors through a stock sale that could raise almost $72 million for the company, before underwriting fees are deducted, based on Tuesday's closing stock price of $14.48.

The stock offering will allow the company to raise money to pay for some of its drug development initiatives, while also providing Athenex with additional working capital.

The company, which reported losses in 2015 and 2016 and is likely to do so again in 2017, said in a Securities and Exchange Commission filing that it finished last year with about $51 million in cash. Athenex executives had said in November that the company likely would have to raise additional money to fund its operations through this year and beyond.

The stock sale would involve 4.3 million additional shares of Athenex stock. If demand is high enough, the company's underwriters could sell an additional 645,000 shares of stock. If that happened, the net proceeds to the company could be in the same ballpark as the $64.9 million that Athenex raised by selling 6.9 million shares of its stock in its initial public offering in June 2017.

Since then, Athenex's shares have rallied, rising from their $11 IPO price to $16.34 on Monday, before the company announced plans to sell additional stock. Athenex stock fell by 11 percent on Tuesday after announcing the stock sale, which will increase the number of shares in circulation. Secondary stock sales typically drive down the price of a company's stock because the additional shares reduce the firm's earnings per share – a key metric in measuring a company's profitability – and dilute the value of shares owned by existing investors.

The company, which has more than 400 employees, has promised to create 450 jobs and spend more than $1.5 billion on operating expenses at the Dunkirk factory during the first 10 years that it is open in return for being able to lease the plant for $1 a year. The company has the option to extend the lease for a second 10-year term under virtually the same financial arrangement.

Athenex is trying to develop new cancer drugs that can be administered in pill form rather than intravenously. And it has developed a way of inhibiting a type of protein, which Athenex officials believe could help limit the growth of some types of cancer. Two of its prospective drugs are in advanced Phase 3 clinical trials.

The company also is making and selling other types of generic drugs in a push to build a revenue stream at a time when its own drug-development efforts are burning through more than $20 million in cash during each quarter.